J&K HC refuses to direct banks to release education loan installment

OVERVIEW

• The Jammu and Kashmir High Court refused to direct a bank to release an education loan for a medical aspirant by saying that they could not interfere in the contractual obligations of parties.

• The division bench of Justice Sanjay Dhar and Justice Puneet Gupta observed that the writ court has limited jurisdiction in contractual matters.

• The Court said that the remedy available for complaining or seeking damages lies within the jurisdiction of civil courts and Writ Courts could only interfere when Public Authority acts arbitrarily or unreasonably or with malafide intention.

THE CASE

• A student got admission to a Community Based Medical College, Bangladesh. Unfortunately, due to the delayed sanction of the first installment from the bank, she got no seat there. But the bank transferred that loan installment later into the same college. She transferred that money to another college, where she got admission through a consultancy service. When the second installment became due, the bank refused to pay the amount.

• The petitioner alleged that due to the delayed sanction of the first installment the Community Based college refused to admit her. The amount that had been paid by the bank to the Community college was, therefore, transferred to another college, Khwaja Younus Ali Medical College, Bangladesh. The petition states that the corporation demanded her to repay the amount issued in her favor, even though she informed them about the change in her college admission.

• Against these, the respondent contended that the loan issued for her was in favor of Community Based College and not for Khwaja Younus Ali Medical College. The petitioner failed to inform the respondent-corporation about her change in college. Thus, it is against the terms and policy of sanction as it was issued for the payment to the Community Based Medical College.

JUDGEMENT

• The division bench of Justice Sanjay Dhar and Justice Puneet Gupta observed that the writ court has limited jurisdiction in contractual matters. The Court said that the remedy available for complaining or seeking damages lies within the jurisdiction of civil courts and Writ Courts could only interfere when Public Authority acts arbitrarily or unreasonably or with malafide intention.

• “The sanction and release of loan amount by a Financial Institution in favor of a borrower is purely a contractual matter governed by the terms and conditions of the loan agreement. Thus in the instant case transaction pertaining to the release of loan amount by the Corporation in favor of petitioner is governed by the terms and conditions of the sanction letter and the Mortgage Deed executed by the father of petitioner in favor of the Corporation. Therefore, this Court has to approach the matter by keeping in mind the principles governing the scope of writ jurisdiction in contractual matters.” - The Court held after hearing both sides.

• The Court has further held that the action of the respondent-Corporation directing the petitioner to refund the first installment of loan amount also appears to be justified because the petitioner admittedly had, on her own, transferred the first installment of loan from the Community Based Medical College, Bangladesh to Khwaja Younus Ali Medical College, Bangladesh without informing the respondent-Corporation, which is a breach of terms and conditions of the sanction letter.

CONCLUSION

No contract could be made oust the jurisdiction of courts as per the Indian Contract Act, 1872. The Court said that the remedy available for complaining or seeking damages lies within the jurisdiction of civil courts and Writ Courts could only interfere when Public Authority acts arbitrarily or unreasonably or with malafide intention.

DO YOU THINK, THE RESPONDENT’S ARGUMENT COULD BE CONSIDERED FAIR TO REJECT THE EDUCATION LOAN OF A STUDENT? Let us know through comments!!!